13 December, 2006

Why Is iTunes Tanking?

Since January 2006, the number of monthly iTunes transactions has declined 58 percent, while the average size per purchase declined by 17 percent, leading to a 65-percent overall drop in monthly iTunes revenue, U.S. market research group Forrester said in a survey among North American consumers.

Wow. I can't speak for everyone, but I can say that those numbers pretty accurately reflect my own iTunes usage. In the first two years that I used the Music Store I purchased regularly. What's a dollar here and there--especially for one-off singles you haven't heard for years? In 2006, though, I've actually spent more on iTunes this month than I did the rest of the year combined. Here are my reasons--and I'm betting I'm not the only one with these reasons:

1. I don't like most of the new stuff out there right now, and I've already bought most of the old stuff that I wanted to hear again.

2. I don't like the fact that the albums don't come with liner notes. I had written to Apple several times about this, because it was becoming a big disincentive for me when purchasing online. I'm not even in the music business, but I love liner notes. I have noticed that Apple Music Store has begun packaging .pdf "booklets" with select titles. That may be too little, too late.

3. Podcasts are free and they're more entertaining, by and large. The bulk of my Music Store time lately has been spent downloading podcasts. To me, the growing popularity of free podcasts has put a huge dent in my Music Store shopping. Before I'd browse the offerings and maybe drop a buck or two on some tunes. Now I can browse AND download the same venue without spending any money.

I don't have all the answers. I do think, though, that these falling numbers are a definite warning shot for Apple AND the Music Industry.

16 Comments:

I think you are right about the new music not being very good. Another thing is, I think people mostly download songs they have like for some time, rather than what is coming out right now. I know when Napster and file-sharing programs came out, everyone spent their time getting hits that had been out for some time, for instance, stuff of the Metallica Black Album, Beatles songs, and cheesy 80s hits, stuff we liked on the radio for some time but didn't spend the cash to buy entire CDs. While new songs were snatched up as well, it was like a ratio of maybe 1 new to 5 old. I imagine it is probably similar behavior with iTunes.

I think you are right about the new music not being very good. Another thing is, I think people mostly download songs they have like for some time, rather than what is coming out right now. I know when Napster and file-sharing programs came out, everyone spent their time getting hits that had been out for some time, for instance, stuff of the Metallica Black Album, Beatles songs, and cheesy 80s hits, stuff we liked on the radio for some time but didn't spend the cash to buy entire CDs. While new songs were snatched up as well, it was like a ratio of maybe 1 new to 5 old. I imagine it is probably similar behavior with iTunes.

I think you are right about the new music not being very good. Another thing is, I think people mostly download songs they have like for some time, rather than what is coming out right now. I know when Napster and file-sharing programs came out, everyone spent their time getting hits that had been out for some time, for instance, stuff of the Metallica Black Album, Beatles songs, and cheesy 80s hits, stuff we liked on the radio for some time but didn't spend the cash to buy entire CDs. While new songs were snatched up as well, it was like a ratio of maybe 1 new to 5 old. I imagine it is probably similar behavior with iTunes.

Actually, they kinda still do...and that's part of the problem. How bad must the market be if the "owner" of the market has seen their sales drop by an anchorload? But you are correct in pointing out that people are slowly but surely finding other options out there. I'm such a Machead that I don't even pay much heed to the other options, even though Jeeves and Wooster talks much love for Napster.

Podcasts take up most of the rest of my time. What are some of your faves?

Man, I'm in trouble when it comes to Podcasts....Of course I do both of the main Harry Potter podcasts (MuggleCast and PotterCast). I also have several Walt Disney World podcasts I listen to frequently--Inside The Magic is my favourite.

Then there's the Penn Jillette radio show (hat tip to Sarcastro for putting me onto that one even though I haven't checked it out in a LONG time).

I'll occasionally do some other ones, but those take up most of my listening time.

I am a nerd.

While new songs were snatched up as well, it was like a ratio of maybe 1 new to 5 old.

Chance, that's how I've spent my iTunes bucks. For crying out loud I actually gave 99cents for "The Night Chicago Died".

Buying “singles” at the iTunes Music Store for .99 each comes out of discretionary dollars, as if most of us even have a designated line item in our personal budgets!

First of all, I question the value of the .99 spent; I’d like the liner notes, lyrics and artwork; thus I tend to lean towards buying back catalog cds from yourmusic.com for 5.99 each (free shipping included) for the real physical cd that I can play in my car, at home, on my PC and Mac and yes, iPod and iTunes player. Guess what? I get liner notes, lyrics and artwork too!

Another issue too are the variety of choices that tug at our discretionary dollars; they include cell phone service, data plans, internet access, DirecTV, Netflix, cable, concert tickets, sports, eating out, TV shows on the iPod, software for PDAs and PC’s… Most households are already spending over $200 per month just on the above services… As for me, the price of gas impacts what I can spend… plus trying to eat healthy is not cheap either.

So I think raising the price of singles to $1.50 will hurt sales even further… As for me, I like the “all you can listen to” menu for a flat rental rate either at Napster or Rhapsody… it’s about value – buy 15 songs at iTunes, listen to 3000 titles buffet style or own two cds with flexibility… iTunes is my last choice.

I agree, Kerry. I do not own an iPod because Apple refuses to support subscription services. I have a Creative Zen Micro MP3 player instead so that I can use Yahoo's subcription service. I can download anything I want so long as I keep my subscription ($12 per month). The only thing I wish were on Yahoo is DMB.

It could also be that fewer people are becoming new iTunes customers. That happens with any market or product, eventually, those planning to use the service will already be using it and those who aren't using it just don't really want to anyhow.

New users tend to spend more because they are building a music collection from scratch (to a degree). Once they've got the collection that they wanted they go more into a "maintenance" phase, only occasionally buying a new song every now and then.

Like buying a house, you spend most of your money at first to get the house fixed up the way you want it. After that initial burst of expenditure, you slow down. Sure you may paint a repaint a wall every so often, or buy a great new painting for over the fireplace, but you almost always spend less keeping your home the way you want it than you do initially getting your home the way you want it.

If iTunes has just reached market saturation, then they could be doing everything right and still expect to see profits drop.

That all said, I second everyone's comments about there just not being any new good music out.

To my knowlege, only music purchased through the new MS Music Store can be played on the Zune. And maybe things you have burned onto your hard drive from CDs.

Even previously purchased Microsoft Plays For Sure tunes will NOT play on your Zune. Napster, Rhapsody, and WalMart were seriously burned by Microsoft with the creation and limitations of their new music store.

Also, you can only use points there. You have to by points in $5 blocks so there is no way you will ever use all of them because the songs are priced in odd numbers. That's how they will make some additional money, the left over pennies in users's account.

To me - that's dishonest, even theft.

I think the decrease in iTunes bottom line is more closely related to what Kerry Woo is talking about. There as so many things to spend money on - one month it might be iTunes. And then you don't think about it for 6 months because the car breaks down, you decide to splurge on new clothes or take a weekend trip.

---------------------

I love my iPod and iTunes. It is way better than the SanDisk/Sansa player and the strange combination of Windows Media Player and Rhapsody I used.

I think everyone who gets an iPod goes a little crazy getting all the stuff they haven't heard in a while and gets all the singles they always wanted, and then it sort of dies down after they have their "collection." A lot of the new music today just plain sucks. And iTunes has made a HUGE mistake of making some CDs all "album only" - part of the joy of iTunes (to me, at least) was being able to pick and choose what songs I wanted, without being forced to buy the whole CD.

I agree with most of the comments, but I want to add that I don't like the way they reorganized 7. It drives me nuts because the party shuffle option opens in a new window. I find it clunkier than it used to be.

Also, pandora.com is a FREE streaming service that basically lets you pick your own artists, songs, et cetera and uses AI to pick similar stuff. It's the most ingenious thing SINCE iTunes. Bummer is it's ad supported.

Thirdly, I think that the market is saturated right now. I'm probably one of the few people who doesn't have an iPod, but I'm in a very small minority. There just aren't enough consumers. It's kind of like the auto industry.

I don't think that this decrease comes as any surprise to Apple. The queston was always a matter of 'when', not 'if'. Every market eventually reaches a saturation point at which everybody who's going to buy product X has bought it, and every company worth its salt acknowledges that eventuality and plans for it.

Granted, the constant infusion of new music should help to a degree, but there's no way that a trickle of new additions each week is going to sustain the same volume of purchasing once the back catalogue has been exhausted. I'd imagine that Apple's recent emphasis on movies, TV shows, games and other non-music content is, to some degree, motivated by the realization that music wasn't going to sustain their revenues indefinitely.